Selecting the Compensation Committee

The Power of
Balancing Personalities

Big job – better get it right – lots at risk if you
get it wrong – you bet. Having the right people
on the compensation committee is critical.

The compensation committee in most law firms we know is typically made up of some of the most respected lawyers in the firm. They have earned credibility through their own practice, skill and reputation. They carry a lot of weight and they have a huge responsibility. They evaluate their peers which is one of the most difficult roles in the firm.

If they get it wrong and wrong decisions result in the departure of one or more of the firm’s key partners, the result can be devastating.

by Karen MacKay, MBA, CHIC
President

Compensation is said to be the very fabric of the partnership. It tells you what’s important – what the firm values gets rewarded. The mechanics also tell you a lot about a firm; is it an open or closed system, how often is partner compensation re-evaluated, is there a bonus pool, is there a balance of subjective and objective criteria – we could go on and on.

No matter what the mechanics of your compensation system are, the most critical issue is a perception that the process is both thorough and fair. To be perceived as fair, a balanced approach is critical. To
have a balanced fair approach from a group of your peers the composition of the committee is important.

A committee can be composed of male partners and female partners in order to address issues of gender bias. It can be composed of young partners and older partners in order to address age bias. A committee composed of a balance of personality types will take it to another level. Let me explain using the Myers Briggs Type Indicator (MBTI) ®.

The MBTI is based on Carl G. Jung’s theory of psychological type that explains normal differences between healthy people. It was developed
by Katharine Cook Briggs (1875- 1968) and her daughter Isabel Briggs Myers (1897-1980). The MBTI helps to identify valuable differences between normal healthy people which can be the source of misunderstandings and miscommunication. Understanding these differences by providing a common language can increase understanding, improve communication and in this instance, improve the perception of fairness and balance.

In the discussion that follows it is important to remember that:

“Extravert” does not mean “loud” or “outgoing”,

“Introvert” does
not mean “shy” or “inhibited”

“Feeling” does not mean “emotional”,

“Judging” does not mean “judgmental”, and

"Perceiving” does not mean “perceptive”.

Even if you have never taken the MBTI you will recognize yourself or your colleagues as you read on.

Energy

Extraversion

Introversion

attuned to the external world

prefer to communicate by talking

learn by doing and discussing

sociable and expressive

talk it through

drawn to their inner world

prefer to communicate in writing

reflective learner

private and contained

think it through

Orientation of Energy: Introversion vs.
Extroversion

MBTI measures our orientation of energy –
where we get our energy. This is known as the
E-I Dichotomy. If you prefer Introversion, you
draw energy from the inside. You prefer to
communicate in writing. You prefer to take the
time to reflect on the issues and work out your
ideas in your head. You think through the issues.
If you prefer Extroversion you draw energy from
the external environment. You prefer to
communicate by talking. You work best by
doing and discussing, in short you talk through
the issues. Now think about your compensation
committee.

A balance of Introverts and Extroverts will
enable the committee to both think through and
talk through the critical issues. The introverts
will give careful, thoughtful, reflective
consideration while the extroverts will be sure
that the group has put the issues on the table –
they will pull the thoughts out of the others on
the committee until they are satisfied.
Designing the format for the compensation
committee’s deliberations requires sensitivity to
the energy needs of the participants. Four days
of straight meetings is tiring for anyone but it
will literally suck the life out of the introverts on the committee. They need breathing space.
They need reflective time and they need some
alone time to be effective.

In evaluating your peers this balance of
introverts and extroverts helps to bring
understanding to the differences within the
partnership. Introverts within the partnership
who are private and contained, even shy, can be
perceived as aloof and arrogant. Extroverts
amongst your partners who need to talk through
their ideas can be perceived as lacking
confidence because they are always bouncing
stuff off people around them.

Perceiving: How We Take In Information

According to Myers Briggs, the first mental
process deals with how we take in information.
This is referred to as the S-N Dichotomy.
Sensing people like facts and data. They are
here and now people – focused on the present.
They deal best with things they can observe first
hand. People that prefer Intuition like ideas and
patterns. They are future oriented and
conceptual. They are big picture people who, in
preference, struggle with the details. They trust
their hunches whereas Sensing people trust their
experience.

On the compensation committee, Sensing people
like buckets of information. They are most
comfortable with what is happening now – time,
WIP, AR, generations, collections – the hard
facts. They trust the tangible.

Intuitive
committee members are more comfortable with
prospective compensation – pay for what is
going to happen in the future. They trust the
relationships between the facts, so if a business
plan makes sense they may trust their gut and
live with the consequences. Sensing people
may take longer to come to a decision because
they want as much information as possible.
Intuitive committee members can see the
possibilities and may rush to a decision if it feels
right.

In evaluating their peers, the tension between
Sensing and Intuition is focused on today’s facts
vs. tomorrow’s possibilities. An Intuitive
committee member may want to reward a good
idea that has possibilities, whereas a Sensing
committee member may struggle with
prospective reward of an idea that has not yet
been proven. An Intuitive Extrovert may be
viewed by a Sensing Introvert as “all talk, no
action”. A Sensing Introvert may be viewed by
an Intuitive Introvert as being devoid of ideas
that will move “this firm into the future”. A
Sensing Extrovert wants information, lots of it
and asks lots of questions. An Intuitive Introvert
needs to think through the ideas and validate
them through reflection.

Judging: How We Come To Conclusion /
How We Make Decisions

The T-F Dichotomy is about how we make
decisions.

People who naturally prefer to use
Thinking in decision-making rely on their
analytical skills. They look at the cause and
effect and use logical objective criteria to come
to a decision about what is fair, right and just.
Law is a thinking profession. Thinkers are
energized by the critical processes and they
quickly spot the errors – sound familiar?

People
who prefer to use Feeling in decision-making
quickly put themselves in the shoes of the
partner they are evaluating. They consider the
importance of the decision on themselves and the
others who might be involved. Feeling people
make decisions based on their values and come
to a decision about what is fair, compassionate
and harmonious. Feeling people often feel like
they are swimming upstream in the law. They
are perceived as too soft. On the compensation
committee they can be the empathetic voice of
support – the one who values future potential.

The tension between Thinkers and Feelers on the
compensation committee varies based on the
culture of the firm. The Thinkers will make
decisions based on logic. Cause and effect will
lead them to a decision where they may
compensate a particular partner more than
someone else, simply because the impact of that
individual’s departure is more important than
whether or not said 900 pound gorilla exhibits
the values the firm espouses.

The cold hard facts
are that we can’t afford to lose him…at least not
now. The objective decision trumps the valuesbased
decision. The Feelers (and their likely
won’t be many of them) will be more inclined to
give a partner another chance. They will be
more empathetic to the fact that he has a troubled
teenager, the dog died and he had the flu three
times in the past twelve months, all of which
impacted his numbers. Feelers will be more
inclined to bend the rules to keep a group
together. In our experience, both Thinkers and
Feelers struggle with the tough decisions but
while Feelers want more time, Thinkers want
more information to get to a tough decision.
Feelers will be compassionate while Thinkers
will be reasonable – both strategies for
procrastinating on the tough decisions.

The Basic Mental Process

Perceiving

Judging

(Taking in Information)

(Organizing Information & Coming to Conclusion - Making Decisions)

Sensing

Intuition

Thinking

Feeling

Facts

Data

Present

Observable

Trust Experience

Build a Careful Case

Ideas

Patterns

Future

Coneptual

Trust Inspiration

Trust Hunches

Analytical

Cause/Effect

Logical

Objective

Tough but Fair

Empathetic

Values Based

Assess Impact

Harmony

Tender but Fair

How We Deal With The World Around Us:
The J-P Dichotomy

When Katharine Briggs and Isabel Myers created
MBTI they went beyond Carl Jung’s work and
added a fourth dichotomy which explores which
of the mental processes [perceiving (taking in
information) or judging (making decisions)] we
preferred to use in the outer world. I often refer
to this as how we organize ourselves against the
world.

Committee members who prefer to use their
Judging process as their interface with the
outside world, are very planned, organized and
orderly. They like meetings to be scheduled,
they show up on time and they like closure – “let’s just make a decision and move on”.
Judging people will get through the
compensation review process if it is scheduled
and organized; if there is a methodology that is
consistently used and predictable. They like to
make decisions and move on. They love to do
lists and sometimes actually write a list of things
that are already done just so they have the
pleasure of checking them off.

Those who prefer to use their Perceiving
function as their interface with the outside world
are flexible, spontaneous and are always open to
shift and change with the environment. They are
open to new information and hesitate to make
final decisions about any of their partners. They
will find final decisions about their colleagues
restricting and confining – they will want to keep
the process open as long as possible. These
committee members are flexible and adapt more
easily to a change in course. This group kicks
into action as the process draws to a close
because the last minute pressure gives them
energy.

As compensation committee members the
tension here is between those who want to make
decisions and those who want to keep an open
mind. A tension will exist between those who
will take comfort in a systematic methodical
approach and those who are more comfortable
with an open ended process that can adapt and
change as new information is presented. Too
many Judgers on the committee may force a
conclusion simply so they can move on. Too
many Perceivers on the committee may extend
deliberations.Taking it a step further, an ST (Sensing Thinking) committee member may be
drawn to the facts, the here and now and rush to
a decision. An NF (Intuitive Feeling) committee
member (and there won’t be many in most law
firms) will be drawn to the ideas presented in a
business plan, be empathetic to the effort
required to execute such a plan and may wish to
reward a partner because it feels right.

Interface with the World

Judging

Perceiving

Scheduled

Organized

Systematic

Methodical

Like to get things decided

Avoid last-minute pressure

Spontaneous

Flexible

Casual

Open-ended

Like to keep things open

Energized by last minute pressure

Myers Briggs can be complicated. It can be a bit
like alphabet soup: ENTJ, ISTP, ENFP, ISFJ
and so on – sixteen types in all. The truth is we
all have different gifts and we have access to all
mental processes, energy sources and
orientations, we simply prefer one over the other.
There is no right or wrong TYPE – no good or
bad TYPE. We can all pick up a pen and sign
our name with our non-preference hand, it just
isn’t as comfortable. There are some
combinations that are naturally attracted to law
and legal training teaches you to develop some
facets of your personality that may not be your
natural preference. MBTI is easily done and
relatively inexpensive.

To formally test
prospective compensation committee members is
not likely in most firms. Do, however, consider
personalities carefully so that the committee is
balanced in terms of style and approach. “Big
job – better get it right – lots at risk if you get it
wrong.”

Having the right people on the compensation committee may help your firm to get it right.